UC’s Bookstaber urges use of agent-based models
Pension fund’s CRO says buy side should go beyond stress tests and try to model systemic risk
Rick Bookstaber, chief risk officer (CRO) for the University of California’s $110 billion pension and endowment scheme, is testing what he calls the third version of risk modelling.
Existing approaches – measuring value-at-risk or conducting stress-testing simulations of possible scenarios – are flawed, says Bookstaber. Risk modelling version 3.0 aims to model reactions to the reactions to possible losses – the total ramifications of a ‘what if?’.
Known as agent-based modelling, it tries to
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